Saturday, January 27, 2007
Is the appointment of Tim Griffin, the U.S. Attorney for the Eastern District of Arkansas, unconstitutional? In a rare motion, Attorney John Wesley Hall questions this appointment and asks the U.S. District Court for the Eastern District of Arkansas to find it unconstitutional. The basis is that the appointment was never submitted to the Senate for its "advice and consent," and that only the President has the power to make such an appointment - not the Attorney General. For more details see the LA Times. The motion is here -
The common phrase uttered by prosecutors asked to grant immunity (or even enter into a plea deal in exchange for cooperation) is "We won't buy a 'pig in a poke.'" Having uttered it myself with no clue what it meant, I once looked up the phrase and learned that in an earlier era pigs (and other animals) being transported to a market to be sold were kept in a "poke" sack, which is a thick canvas bag, to keep them from escaping -- pigs were especially prone to running away, so the sack was kept tied tightly. Rather than buying something sight unseen (like we do on the internet all the time), the purchaser demanded to see the animal before paying for it, lest he buy the pig in an unopened poke. For prosecutors, the phrase is an indication that the witness/defendant has to provide a statement, usually called a proffer, before the government will make a deal.
The prosecution of I. Lewis Libby has brought this timeworn phrase to the forefront with news that former White House spokesman Ari Fleischer sold the aforesaid pig in a poke to Special Counsel Patrick Fitzgerald when he demanded immunity during the investigation of the leak of Valerie Plame's status as a CIA agent without first making a proffer. Fleischer is scheduled to testify against Libby at trial, and the prosecutor refuses to turn over any notes because they are not witness statements (under the Jencks Act) nor was there a deal for Fleischer to receive immunity in exchange for certain testimony. In that sense, while the government knows the outlines of Fleisher's testimony, the exact nature of it will be a surprise to both sides, at least according to Fitzgerald. Needless to say, defense counsel are skeptical that an experienced prosecutor like Fitzgerald would make a blind immunity deal and are demanding to know what has been said about Fleisher's testimony.
An AP story (here) quotes Fitzgerald as stating in court, "I didn't want to give him immunity. I did so reluctantly . . . I was buying a pig in a poke." Although I doubt Fitzgerald meant the porcine reference to relate specifically to Fleischer, it certainly shows that the Special Counsel was willing to take a significant risk that Fleischer would say things that would protect others in the administration while making it virtually impossible to pursue criminal charges against him because of the immunity. While risky, the grant of immunity without hearing Fleisher's likely testimony allows him to state on the witness stand that he did not "bargain" for that protection in exchange for "tainted" testimony, thus giving his credibility a small but potentially important boost. Never having bought a real pig in a poke, I can't say what the risk there really is, but in a high-stakes investigation like this one Fitzgerald has shown his willingness to take chances. To the extent the prosecutor denies having any information on what Fleischer promised to testify about, U.S. District Judge Walton's hands are largely tied because he can't order the government to turn over what it doesn't have, even if the government purposely chose to avoid creating such material to hamstring the defense. (ph)
The guilty plea of private investigator Bryan Wagner to federal identity theft charges has led to the dismissal of the state charges filed against him in 2005 because of California's double jeopardy statute. Wagner was involved in pretexting on behalf of Hewlett-Packard to obtain private telephone records of reporters and company employees to track down leaks, and he was one of the five defendants charged by the California Attorney General's Office for various offenses related to that conduct. Wagner entered a guilty plea to charges filed by the U.S. Attorney's Office for the Northern District of California and agreed to cooperate in that office's ongoing investigation, signaling that the federal case that had appeared to be dormant was in fact moving forward. One consequence of the federal conviction is that it triggers the protection of California Penal Code Sec. 656, which provides: "Whenever on the trial of an accused person it appears that upon a criminal prosecution under the laws of the United States, or of another state or territory of the United States based upon the act or omission in respect to which he or she is on trial, he or she has been acquitted or convicted, it is a sufficient defense."
The constitutional double jeopardy protection does not prevent one state, or the federal government, from prosecuting a person for the same crime already prosecuted by another state under the "dual sovereignty" doctrine. For example, that doctrine permitted the federal prosecution of the police officers who beat Rodney King after their acquittal on state charges. While the federal Constitution does not bar a second prosecution, California law does, so state prosecutors have acknowledged that the charges against Wagner must be dropped (see AP story here).
I assume the federal prosecutors know the California rule, and simply decided to proceed regardless of the effect on the pending state charges. Wagner is the low man on the pretexting totem pole, and could still be called as a witness in the state case to testify against the remaining four defendants if his plea agreement with the U.S. Attorney's office requires him to do so. The federal charges seem to show a lack of cooperation, or at least coordination, between the federal and state prosecutors because it is uncommon for one office to file charges that effectively knock out a case being pursued by another office. If the federal prosecutors bring charges against additional defendants in California's case, it may undermine that prosecution because of the double jeopardy protection afforded by state law. In this instance, there is not a two-way street between the federal and state governments. (ph)
Friday, January 26, 2007
Natural disasters often bring out the best in people, but the lure of easy money in the aftermath can sure bring out the worst. An indictment in the Southern District of Texas charges five people with a scheme to obtain over 100 payments from FEMA for relief from Hurricanes Katrina and Rita. According to a press release (here):
According to the indictment, the five defendants, along with co-conspirators Curtis Caldwell and Ernest Tutt, Jr., who have previously been charged with mail fraud in connection with their filing of fraudulent FEMA claims, conspired to file 103 fraudulent FEMA claims for Hurricane Rita and Katrina disaster assistance between September 5, 2005 and June 14, 2006. Octavia Caldwell allegedly provided the other defendants with addresses in New Orleans and Lake Charles–addresses that sometimes did not exist–to use in filing numerous FEMA claims even though all the defendants resided in Harris County when Katrina and Rita made landfall. The defendants used social security numbers belonging to other individuals, who had no knowledge of the scheme, in their claims to avoid detection. The alleged scheme also involved the defendants using different middle initials when filing their claims, and directing funds be delivered via the U. S. Mail to the “current mailing address” included in the claim, which was frequently changed in an attempt to conceal the filing of multiple claims by the same person. The indictment further alleges the defendants used fraudulent Louisiana drivers licenses when cashing the fraudulently obtained assistance checks at various Houston area locations.
All told, the scheme is alleged to have bilked the government out of almost $150,000. A lot of effort goes into these schemes, and you wonder how much is not being caught by investigators and going to scam artists who see a quick buck in a widespread tragedy. (ph)
Federal prosecutors in Cleveland charged three former officials with the Cleveland Housing Network, a non-profit that rented houses primarily to low-income tenants, on bribery charges for demanding kickbacks from contractors. Two defendants were Regional Coordinators with CHN and the third was a maintenance supervisor, and a press release (here) describes the alleged corruption:
[C]ertain contractors hired to perform repair and rehabilitation work on CHN properties were required to kickback a portion of money CHN paid them to a Regional Coordinator in return for continuing to receive business from CHN. The Regional Coordinators also required certain contractors to seek payment from CHN for work that the contractors had never performed and to give these payments to the Regional Coordinator in return for continuing to receive business from CHN. At times, portions of these improper payments were shared with [one defendant]. Defendants also required certain contractors to perform repair work without compensation at Defendants’ personal residences and Defendants’ relatives residences in return for continuing to receive business from CHN.
Thursday, January 25, 2007
A report on Yahoo.Com (here) states that a federal investigation of possible extortion of former Heisman Trophy winner Reggie Bush includes tapes made by sports marketers who may have given Bush and his family large financial benefits while he was a "student-athlete" at USC. The allegations of improper payments first emerged after Bush finished his career USC in January 2006, and there were claims that he had agreed to be the first client for a new sports marketing agency. When the deal didn't come to fruition, Bush alleged that he received extortion threats, triggering a federal grand jury investigation in San Diego, where the agency was headquartered. Among the items subpoenaed were tapes that allegedly include Bush stating he would repay the money he received and for a car he drove. The receipt of such benefits by a college athlete means the person loses their eligibility, and likely would trigger NCAA sanctions against USC; Bush is beyond the jurisdiction of the college sports czars, and is a likely choice for NFL Rookie of the Year for his play with the New Orleans Saints this season.
This would not be the first federal case involving questionable payments to "student-athletes" by shady characters. The prosecution of Norby Walters in the 1980s on RICO and mail fraud charges involved secret payments by a sport agents to college players who later reneged on their deals, and threats against them. For a summary of the case, see United States v. Walters, 997 F.3d 1219 (7th Cir. 1993). (ph)
The trial of I. Lewis Libby is moving down the the path of triggered memories and challenges to suddenly clearer recollections as the government focuses on when Libby learned that Valerie Plame was a CIA officer and defense counsel challenges the recall of the government witnesses. The government's second witness was former CIA associate deputy director Robert Grenier, who testified that Libby contacted him to learn about former Ambassador Joseph Wilson's trip to Africa. Grenier said that he was called out of a meeting with the CIA Director by a second call from Libby for further details on the trip, and that he told Libby that Wilson's wife was a CIA agent in the group that arranged the trip. On cross-examination, William Jeffress noted that Grenier's testimony was different from his earlier statement to the FBI that he did not recall telling Libby that Wilson's wife (Plame) worked for the CIA. Jeffress asked, "Do you find your memory gets better the further away from an event you are?" Classic cross-examination to impugn the witness's testimony, a question that does not really seek an answer -- Grenier said, "It depends." The case remains one about the credibility of witnesses, and whether the jury will accept the version presented by the government or Libby. Talk of scapegoating during the opening has a certain rhetorical value, but the assessment of witness recollections (or the lack thereof) will likely tell the tale. A Washington Post story (here) discusses the latest testimony, and the blog Firedoglake live-blog's the testimony (here). (ph)
In the annals of embezzlement cases, this one certainly rates as one of the more audacious for the length of time over which it occurred and the lavish lifestyle the stolen money afforded. The U.S. Attorney's Office for the District of Massachusetts issued a press release (here) discussing the criminal information filed against Angela B. Platt, who worked as the staff accountant for a building materials company. According to the charge, she embezzled $6.9 million over nearly seven years, starting with smaller checks ($2,000 to $5,000) deposited into an out-of-state account until the last couple years when they were in the $50,000 range. More than just the amount taken is Platt's spending, which, as usual, includes a few rather cheesy items. According to the press release, she purchased "A 104-acre ranch in West Haven, Vermont, on which she built a log cabin, with a heated saltwater swimming pool, and two barns, one of which housed a commercial-caliber arcade; A four-bedroom Colonial-style house on five acres of land in Foster, Rhode Island with a home movie theater; Thirty acres of undeveloped coastal land in Harrington, Maine; Timeshares in Disney World and at the Harborside Resort Condominium II on Paradise Island in the Bahamas; Eight show horses; Five all-terrain vehicles, five high-end snow mobiles, three commercial farm tractors and a motorcycle; A fleet of motor vehicles . . . " The fleet, over twenty vehicles, included a "replica 1923 Ford Model-T customized into a novelty car dubbed the 'Green Goblin,' with a body fashioned as a green fairytale-looking monster." Platt was also "[a] devoted Halloween enthusiast, [purchasing] various Hollywood-grade cinematic props to decorate her home for Halloween, including a twenty-foot tall, smoke-emitting dragon called 'The Slayer' which sported hydraulically-powered wings and a booming dragon roar. PLATT also purchased six talking trees like those in the Wizard of Oz, at a cost of $3,000 each, and a life-size ceramic statue of Al Capone (seated, smoking a cigar)." I can't wait to see what these things fetch at the auction to repay the money embezzled from the company. Somehow, I don't think her former employer should expect to receive much back as restitution; Wizard of Oz replicas just don't command top dollar any more. If the "staff accountant" acquired over twenty vehicles, multiple houses, the Green Goblin and a dragon, could that be just a little bit of a tip-off that something might not be right with the books? (ph)
Tuesday, January 23, 2007
Many people have comments about the opening day of the Libby trial. One thing is for certain from the defense opening statement - the name Karl Rove is a name that will be mentioned in the days ahead. And for Karl Rove yet a another stroke of luck (?) as the newspapers will be reporting this on the same day as the President's State of the Union Address. Which one was above the fold and in the center of the paper that you read?
Here are some descriptive portrayals or blog entries of day number one -
Talk Left here
New York Times here
Washington Post here
Wall Street Jrl here
It appears that Apple Inc. CEO Steve Jobs met with prosecutors from the U.S. Attorney's Office for the Northern District of California and SEC investigators to explain his role in options backdating at the company in 2001. Apple earlier revealed that "[a]lthough the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications." According to an article in The Recorder (here), Jobs was interviewed by the government to explain his lack of knowledge of the accounting issues and that he did not knowingly violate the securities laws.
While risky, Jobs' meeting with prosecutors is not unprecedented in white collar crime investigations, and there can be substantial benefits in presenting a well-prepared witness to provide the government with additional information that can dissuade it from pursuing a case against the individual. There is always the risk of the "Martha Stewart" effect, that the witness will be prosecuted for making a false statement. But the upside can also be significant if the government perceives that the witness has nothing to hide and presents a plausible story. While counsel must proceed cautiously, there is no firm rule against having a client meet with investigators to present his or her side of the transaction, especially when the case will revolve around intent.
The Recorder also notes a bit of disarray in the options-timing investigations in the Northern District of California, with U.S. Attorney Kevin Ryan and two of the lead prosecutors in the probes headed out the door. Ryan was among the U.S. Attorneys recently forced out of office, and it will be interesting to see if the new leadership in the USAO has the same commitment to undertaking these types of complex, document-intensive cases that may not generate any criminal prosecutions. (ph)
Broadcom Corp. announced the largest restatement to date due to options-timing issues, totaling $2.2 billion, due to inadequate documentation covering the first five years in which it was publicly traded. In the typically bland terms describing such decisions, Broadcom's 10-K (here) states:
From our initial public offering through May 2003, Broadcom’s option grant processes and procedures were not formalized or consistently followed . . . The Equity Award Committee did not conduct formal meetings with respect to all option grants; rather, the committee members often held informal discussions, either in person or telephonically, to determine whether option grants should be approved and priced as of that day. The Equity Award Committee members conferred frequently (often weekly) during 1998 and 1999. From 2000 through 2002, the Equity Award Committee members conferred less frequently and sometimes made option grants only once a quarter. No formal, contemporaneous written records of the Equity Award Committee discussions or meetings were kept. Instead, the Equity Award Committee relied upon, and option grant approvals were documented by, unanimous written consents, which were dated “as of” a specified date but were generally prepared after that date and signed at a later time. Thus, Broadcom has been unable to locate affirmative, contemporaneous documentation of Equity Award Committee meetings related to many past option grants.
The responsibility is put largely at the feet of co-founder and former CEO Henry T. Nicholas, III, but the company is quick to exonerate him and other CEOs by noting that none of them personally gained from the options awards. A press release (here) stresses, "No option grant requiring a measurement date revision was awarded to Broadcom's co-founders (Henry Samueli and Henry T. Nicholas III), either of the Chief Executive Officers who succeeded Dr. Nicholas (Alan E. Ross and Scott A. McGregor), or any current or former member of the Board of Directors." The Nicholas Family Trust owns over 36 million shares, so Nicholas had little need to enrich himself further on company options. The size of the restatement and apparent involvement of a former CEO in the timing decisions is likely to draw even further interest from prosecutors and the SEC. (ph)
Monday, January 22, 2007
The trial of one individual in the Coke trade secrets case began today. (see Atl. Jrl Constitution here). Two others previously plead guilty after being charged with trying to sell trade secrets to Pepsi for 1.5 million dollars. (background here and here). Assistant U.S. Attorney Randy Chartash, an experienced attorney, is presenting the government's case. The case may rest on the credibility of the witnesses who testify against the former secretary, and defense counsel in opening statement provided a preview of what some of the problems may be with that testimony. (see here).
Yesterday, the United States Supreme Court issued an opinion in the case of Cunningham v. California, a sentencing case that may "constrain judges' power in sentencing." (See Linda Greenhouse, N.Y.Times).
But the cases that may be more crucial in the white collar area are still outstanding in the Supreme Court - the cases of Claiborne and Rita. (see here). More briefs were filed in these cases- see here.
Sunday, January 21, 2007
The second week of the I. Lewis "Scooter" Libby trial starts today, and the jury has yet to be selected. But it is anticipated that this will happen by the end of the day. For details on the jury selection process check out the Washington Post here and Firedoglake here. It seems obvious from reading the media and blogs that this case will not be streamlined to cover just obstruction and perjury allegations. It appears likely that the defense will be opening the door to cover matters that will relate to Iraq, or matters that may explain the surrounding circumstances at the time of the alleged criminal conduct. As prosecutors can infer intent from the circumstances, the defense also has the right to have evidence that might shed a different light on the intent of the accused. But what that defense will be and how it will develop remains to be seen. Oftentimes the theme of the defense case can be seen when listening to the opening statement. Jerri Merritt at TalkLeft has some pointers here. It is always important to keep in the back of one's mind that the defense is not required to testify and is not required to prove anything. The burden rests with the government.
Over in Cleveland, a vote recount case is progressing with the prosecution presenting opening statements this past week. This may be an odd case in that the alleged impropriety may be found to be resulting from laziness and not for political reasons. Check out the Cleveland.com (AP) here for the details.
After an incredible record with the Katrina Task Force, Assistant AG of the Criminal Division, Alice S.Fisher, in conjunction this time with Paul McNulty, DOJ's Deputy Attorney General (a person under fire for the recent McNulty Memo), appear to be getting the National Procurement Fraud Task Force off the ground. To date there have been several indictments forthcoming from this task force. These include:
- A former army office defense contractor convicted of wire fraud and bribery - here
- A former U.S. Army contractor pleading to bribery and a tax violation - here
- A former Tammi Global Exec being sentenced in a kickback scheme - here
This task force is one that deserves close scrutiny to see if Alice Fisher's incredible results with the Katrina Task Force can be replicated in this new fraud task force.